Turkish Inflation Rate Probably Slowed in November: Week Ahead

By Steve Bryant

Dec. 1 (Bloomberg) -- Turkish inflation probably slowed in November as consumer spending tumbled, supporting the central bank’s decision to cut interest rates this month and opening the way for a further reduction.

The inflation rate fell to 11 percent from 12 percent in October, according to the median estimate of 13 economists surveyed by Bloomberg. The statistics agency will announce the data at 5 p.m. in Ankara on Dec. 3.

Consumer confidence slid to a record in October, exports are waning and the government is in talks about a loan accord with the International Monetary Fund. The slowdown in growth and inflation led the central bank on Nov. 19 to reduce its benchmark interest rate by half a point to 16.25 percent, even as the lira weakened. None of 20 economists surveyed had forecast the change.

“Demand conditions are extremely weak,” said Tevfik Aksoy, an economist at Morgan Stanley & Co. in Istanbul. Slower inflation “would help justify the bank’s decision to cut and if that happens, then I wouldn’t be surprised to see another” half-point reduction in December.

A decline in global commodity prices will also assist in slowing inflation, the bank said on Nov. 19. Oil prices have fallen to about one third of the July record of $145.29 a barrel.

At the same time, the global credit crisis has pushed the lira down 18 percent against the dollar since the start of the month, raising import costs. The slowing economy will limit the impact of the weaker lira, the central bank said on Nov. 19. The bank is aiming for inflation of 7.5 percent by the end of 2009.

Markets, Calendar

The statistics agency will release figures for October industrial output and capacity utilization in November on Dec. 12. Industrial output fell 5.5 percent in September, the biggest decline since 2002.

The benchmark ISE National 100 Index gained 17 percent to 25,714.98 last week. The lira rose 5 percent against the dollar to 1.5736 at 5:25 p.m. on Friday and the yield on the benchmark government bond tracked by ABN Amro fell to 20.41 percent from 21.99 percent a week earlier.

The following is a list of important events in Turkey next week:

Event                                                  Date
November inflation data                                Dec. 3
October industrial output                              Dec. 5
November capacity utilization                          Dec. 5

To contact the reporter on this story: Steve Bryant in Ankara at sbryant5@bloomberg.net.